Congress Is Planning To Spend Millions On Search For Aliens, UFOs

Via ValueWalk.com,

A new bill in the House of Representatives related to NASA’s funding proposes $10 million a year to search for signs of life out there.

A climate denier may be the reason the S-word is back in vogue in Congress. Oh yeah, not that S-word, the other one: SETI.

That’s right, Congress is talking about spending a bunch of money on the search for extraterrestrial intelligence (or SETI) for the first time in 25 years.

In 1992, a huge NASA SETI initiative was launched with the construction of two radio telescopes (one in Puerto Rico and the other in California) to comb the cosmos for signals from alien civilizations. Just a year later, however, Nevada Sen. Richard Bryan shut it down, and “SETI” became an unmentionable. [Greetings, Earthlings! 8 Ways Aliens Could Contact Us]

“[Bryan] made it clear to the administration that if they came back with SETI in their budget again, it wouldn’t be good for the NASA budget,” renowned astronomer Jill Tarter told Marina Koren of The Atlantic.

“So, we instantly became the four-letter S-word that you couldn’t say at headquarters anymore, and that has stuck for quite a while.”

(Tarter was the director of the SETI Institute for 35 years before stepping down in 2012.)

Now, the U.S. House of Representatives has proposed a bill that includes $10 million in NASA funding for the next two years “to search for technosignatures, such as radio transmissions, in order to meet the NASA objective to search for life’s origin, evolution, distribution, and future in the universe.” Such technosignatures would come in the form of radio waves that have the telltale features of being produced by TV- or radio-type technologies. An intelligent civilization could also produce those signals intentionally to communicate with other civilizations like ours.

“If it passes, it would definitely be a sea-change in Congressional attitude since Sen. Bryan terminated NASA’s SETI program, the High Resolution Microwave Survey, in 1993,” Tarter told Live Science in an email.

She added that the funding seems to be an extension of the efforts of Rep. Lamar Smith, R–Texas, to bring attention to the search for life beyond Earth when he was the chairman of the House Science Committee. (Smith, who announced that he will retire at the end of his term this year, is a known denier of human-caused climate change.)

If the legislation clears the House and passes the Senate, the result would be huge. “It allows for new instrumentation to be built, and data collected and analyzed at scale, by a global community,” Tarter said of the $10 million.

Of course, the hunt for intelligence beyond Earth has not stopped, as private companies and other organizations have funded it, but a buy-in from the federal government is a big deal. [7 Huge Misconceptions about Aliens]

“You need to remember that this is an authorization bill, not an appropriations bill. Even if it passes, the appropriators may not provide any SETI funding in their bill. But if they do, that would be a very big deal,” said Tarter, who was the basis for the heroine Ellie Arroway in Carl Sagan’s novel “Contact” and in the adapted movie by the same name.

Tarter is admittedly ecstatic about the possibility of such a federal focus on SETI. But you don’t become the director of the SETI Institute by keeping your feet on the ground.

“Bring it on! But don’t stop there,” Tarter said about the potential funding. “Earthlings everywhere are fascinated with this search and care about the answer. So, we should create an international endowment for searching for intelligent life beyond Earth. The backers should be private individuals, enlightened corporations, U.S. federal agencies and agencies from other governments around the world.”

She added, “By smoothing out the funding roller coaster that has characterized this research field from the beginning, it will be possible to attract the best and brightest minds with the best ideas from everywhere, and commit to the long-term search efforts that might be required for success.”

Are alien greetings just around the corner? Tarter said we have the technology now to search for more distant and fainter signals in ways we haven’t tried before. “But that doesn’t guarantee success in the ‘near future.’ The cosmos is vast, and we may not yet be looking in the right way, although we are doing the best job possible with what we now know.”

The “correct perspective on timing,” Tarter said, is summed up in a line from a paper published in 1959 in the journal Nature by Giuseppe Cocconi and Philip Morrison: “‘The probability of success is difficult to estimate; but if we never search, the chance of success is zero,’” Tarter said.

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‘Murdaland’: Baltimore Homicides For 2018 Spike At “Second-Fastest Pace In A Decade”

Congratulations, Baltimore (‘Bodymore’) — homicides are booming. 

Baltimore tagged the psychological level of 100 homicides for the year with the fatal stabbing of a 74-year-old man and the deadly shooting of a 16-year boy in West Baltimore Tuesday, “marking the second-fastest pace of killings in the city in a decade,” said The Baltimore Sun.

While homicides in Baltimore tend to be a seasonal phenomenon, the wave of killings climbed above trend in Aprill following a period of warmer temperatures. In all of 1Q, homicides were below the average, due to frigid arctic conditions that blasted the Northeastern United States.

In 2017, the city saw its 100th homicide on April 24. As The Baltimore Sun notes, the city had not experienced 100 murders this early in the killing season since 2007, when it occurred on May 7. The total number of killings this year remains somewhat below this time last year, which, by the way, was the deadliest year ever to be recorded in the city’s history, on a per capita basis, with 342 murders. In 2015/2016, which saw the second- and third-most homicides per capita in city history, there were not 100 murders until the end of May. The Baltimore Sun added that “in all the other intervening years since 2007, the city did not hit 100 homicides until June or July.”

The Baltimore Sun expects homicides in the city to “likely to surpass 300 homicides for the fourth year in a row.”

“At the current pace of violence, the city is likely to surpass 300 homicides for the fourth year in a row. Prior to the surge in killings that began in 2015, the city hadn’t seen 300 homicides in a single year since the 1990s.”

To put things in perspective, Baltimore’s murder rate is 4x the average of other large cities and some 40 percent higher than Detroit. To make matters worse, Baltimore is now precisely tied with Venezuela, a country suffering from an economic collapse at 57.2 murders per 100,000 residents.

Earlier this year, Mayor Catherine E. Pugh replaced Kevin Davis as police commissioner, after a record year in per-capita homicides that transformed Maryland’s largest city into one of the most dangerous areas in the United States. To counter the negativity, Mayor Pugh contracted the Tucker Group, a $240-per-hour media consultant firm to flood web searches and social media feeds with propaganda.

Local community organizing groups have had enough with the collapsing city. They have scheduled the “Baltimore Ceasefire” event this weekend, Friday through Sunday. The group hopes they can slow the rate of homicides before the above average killings start in the summer.

“You can just sit back & wait for things to change, or you can be the change you wanna see. #BaltimorePeaceChallenge #BaltimoreCeasefire,” wrote Erricka Bridgeford, one of the peace effort’s founders, on Twitter on Wednesday morning.

“This weekend in Baltimore we make sure nobody’s mother has to get that call,” another Twitter user said.

Children were seen plastering Baltimore Ceasefire signs on visible structures in the most dangerous streets in America.

Baltimore Ceasefire signs are showing up all around the city as community members plea with the drug gangs to stop the killing.

Baltimore Ceasefire founder has a message to the “gangstas” before this weekend festivities…

We are shocked the State Department has not slapped the dying town with a travel warning, as its inner city is expected to descend into further chaos this summer. The Baltimore Sun forecasts another deadly year with homicides above 300. Democrats have ruled City Hall for more than 50 years, as hundreds of thousands of residents have fled the region over the decades — sending the total population to a 100 year low in 2017. Something has to change, otherwise — the city is facing a  collapse. Maybe the signs of a collapse are nearing, as we reported earlier this week, Baltimore’s restaurant bubble has imploded.

* * *

Breaking Point| Baltimore’s 200th Homicide Scene Erupts in Anger (Summer 2017) 

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Trump’s Ten Lies: A Response To The Iran Nuclear Agreement Speech

Authored by Ted Snider via AntiWar.com,

After listening to Trump’s speech explaining his decision to pull out of the Joint Comprehensive Plan of Action (JCPOA) nuclear agreement with Iran, Iran’s Supreme Leader, Ayatollah Ali Khamenei, said that Trump’s speech contained “over ten lies.” Khamenei didn’t go on to name the lies.

So, what were the lies Trump told?

Lie #1

“The Iranian regime is the leading state sponsor of terror”

The United States has long known that its ally, Saudi Arabia, and not its enemy, Iran, is the leading state sponsor of terror. All recent attempts to link Iran to terrorism have failed. Even America’s own reports on terrorism don’t list Iran as the leading state sponsor of terrorism. The State Department’s Patterns of Global Terrorisms “rarely identifies a terrorist incident as an act by or on behalf of Iran.” And, the most recent Global Terrorism Index from the Department of Homeland Security clearly states that, not Iran, but “ISIL, Boko Haram, the Taliban and al-Qaeda” are the biggest terrorist threats. None of these four groups is Shiite and none is aligned with Iran, but combined they are “responsible for 74 per cent of all deaths from terrorism.” The Index also clearly identifies “ISIL,” not Iran “as the deadliest terrorist group.”

As The U.S. well knows, Saudi Arabia is the leading state sponsor of terror. As early as 2009, the State Department had already declared that “Saudi Arabia remains a critical financial support base for al-Qaeda, the Taliban . . . and other terrorist groups.” A widely circulated 2012 classified Defense Intelligence Agency Information Intelligence Report identified the “supporting powers” of ISIS to be “Western countries, the Gulf States and Turkey.” Two years later, Vice President Biden was still making the same case against, not Iran, but Saudi Arabia: “[O]ur allies in the region were our largest problem in Syria . . .. They poured hundreds of millions of dollars and tens, thousands of tons of weapons into anyone who would fight against Assad except that the people who were being supplied were Al Nusra and al-Qaeda and the extremist elements of jihadis.” Point 4 of a memo written by Hillary Clinton on September 17, 2014 confesses that based on “western intelligence, US intelligence and sources in the region, “the US knew that “the governments of Qatar and Saudi Arabia . . . [were] providing clandestine financial and logistic support to Isis and other radical groups in the region.” And, in 2015, President “Obama and other US officials urged Gulf leaders who are funding the opposition to keep control of their clients, so that a post-Assad regime isn’t controlled by extremists from the Islamic State or al-Qaeda.”

Lie #2

“The Iranian regime . . . supports . . . the Taliban and Al Qaeda”

After 9/11, Iran immediately sided with the U.S. against the Taliban and al-Qaeda. The Northern Alliance, who provided many of the anti-Taliban fighters once the Americans and her allies invaded Afghanistan, was largely put together by Iran, who placed it in the hands of the Americans. Iran offered its air bases to the US and permitted the US to carry out search and rescue missions for downed US planes. The Iranians also supplied the US with intelligence on Taliban and al-Qaeda targets. Iranian diplomats were secretly meeting with US officials as early as October 2001 to plan the removal of the Taliban and the creation of a new government in Afghanistan. At the Bonn Conference of December 2001, Iran was absolutely crucial in setting up Afghanistan’s post-Taliban government.

Iran also arrested hundreds of the al-Qaeda and Taliban fighters who escaped into her borders. Iran documented the identity of more than two hundred al-Qaeda and Taliban escapees to the United Nations and sent many of them back to their homelands. For many others who couldn’t be sent back to their own countries, Iran offered to try them in Iran. Iran also followed up on an American request to search for, arrest and deport several more al-Qaeda operatives that the US identified.

Lie #3

“Over the years, Iran and its proxies have bombed American Embassies and military installations, murdered hundreds of American service members, and kidnapped, imprisoned, and tortured American citizens.”

The claim that Iran has been responsible for the bombing of American military installations is highly questionable. The 1983 Hezbollah bombing of the American barracks in Beirut that killed 241 members of the American military was an attack on a military base in Beirut belonging to a foreign invader that was actively and currently bombing Lebanon.

As for the 1996 bombing of the Khobar Towers housing complex for American military personnel in Saudi Arabia, the case against Iran rests largely on information provided by their enemy, Saudi Arabia. Michael Scheuer, director of the Bin Laden unit, says that “a substantial body of evidence” pointed, not to Iran, but to al-Qaeda. Flynt Leverett and Hillary Mann Leverett say that by 1998, even the Saudis were admitting that the bombing “was executed by Saudi hands. No foreign party was involved”. Then Secretary of State Warren Christopher also declared that “there was never any adequate proof” that Iran was involved. Clinton’s defense secretary, William Perry, said clearly that “al-Qaeda rather than Iran was behind” the bombing.

As for kidnapping American citizens, that was 39 years ago, and the charge ignores the context. As the Americans had used a coup against the democratically elected Mohammad Mosaddeq in 1953 to thwart Iran’s first attempt to remove the Shah, so Iranians saw the US providing sanctuary to the Shah in 1979 as another American attempt to midwife the same fate again. As professor Vali Nasr of Tufts University has said, “In the popular mind, the hostage crisis was seen as justified by what happened in 1953”.

Lie #4

“No action taken by the regime has been more dangerous than its pursuit of nuclear weapons – and the means of delivering them.

Iran is not pursuing nuclear weapons. Iranian President Hassan Rouhani has said repeatedly that “We have never pursued or sought a nuclear bomb, and we are not going to do so”. Both Supreme Leader Ayatollah Khamenei and his predecessor, the founder of the Islamic Republic of Iran, Ayatollah Ruhollah Khomeini, have insisted that Iran would never pursue nuclear weapons because nuclear weapons are against the precepts of Islam. Khamenei has insisted that “from an ideological and fiqhi [Islamic jurisprudence] perspective, we consider developing nuclear weapons as unlawful. We consider using such weapons as a big sin.”

And no one really believes otherwise: not US intelligence and not Israeli intelligence.

Former CIA director and Secretary of Defense Leon Panetta asked, “Are they [Iran] trying to develop a nuclear weapon?” and succinctly and pointedly answered: “No”. The 2007 National Intelligence Estimate (NIE), representing the collective conclusions of all of America’s many intelligence agencies, said with “high confidence” that Iran was not building a nuclear weapon. The 2011 NIE said that “the bottom-line assessments of the [2007] N.I.E. still hold true. We have not seen indications that the government has made the decision to move ahead with the program”.

Yuval Diskin, the man who headed Shin Bet, the Israeli domestic intelligence agency, for six years, accused Prime Minister Netanyahu of “misleading the public on the Iran issue.” And Lieutenant-General Benny Gantz, then Chief of Staff of the Israeli Defense Forces, insisted that Iran has not “made the decision” to pursue a nuclear weapons program. Then Defense Minister Ehud Barak, clearly stated that “it is not the case” that “Iran is determined to . . . attempt to obtain nuclear weapons . . . as quickly as possible.” He added rhetorically, “To do that, Iran would have to announce it is leaving the inspection regime . . .. Why haven’t they done that?”

Former director of the International Atomic Energy Agency (IAEA) Mohamed ElBaradei told investigative journalist Seymour Hersh that “[d]uring my time at the agency, we haven’t seen a shred of evidence that Iran has been weaponizing”.

The bottom line is that no one – not the United States, not Israel, not the International Atomic Energy Agency – ever really believed Iran was developing nuclear weapons.

Lie #5

“The deal lifted crippling economic sanctions on Iran in exchange for very weak limits on the regime’s nuclear activity”

They were not weak limits. Iran vastly reduced the number of its centrifuges and bricked in its heavy water reactor at Arak. Iran destroyed its entire stockpile of medical uranium enriched to 19.5% and no longer enriches beyond 3.67%, leaving them a legal civilian nuclear program for electricity: and even the amount of low enriched uranium Iran can keep is strictly limited to under 300kg. Its Fordow nuclear facility was converted into a nuclear, physics and technology center.

Iran agreed to submit to a highly intrusive regime of inspections and monitoring by the IAEA, including spot inspections to ensure that these goals were being met. Iran also agreed to the “use of IAEA approved and certified modern technologies including on-line enrichment measurement and electronic seals.”

The agreement even limited some research and development for a specified period of time.

Lie #6

“The deal lifted crippling economic sanctions on Iran . . .. at the point when the United States had maximum leverage”

Trump’s assessment of the efficacy of the sanctions is a fantasy. There is no evidence that the Iranian regime was on the brink of collapse or that they were forcing the termination of Iran’s civilian nuclear program. On the contrary, the sanction strategy had reached its limit and Iran was now winning the sanctions versus nuclear program enlargement battle. Trita Parsi says that, though “US intelligence services had predicted that mass demonstrations and riots would occur within months after the imposition of sanctions . . .. the government in Tehran never lost control.” Enrichment of uranium for peaceful civilian purposes is legal under the Non-Proliferation Treaty, and Iran’s right to exercise the same rights as every other country became a point of profound national pride for Iranians who stood by the Rouhani administration.

Sanctions actually had an effect opposite to the desired one. Iran escalated its building of centrifuges and grew its stockpile of low- and medium-enriched uranium to prove to the US that pressuring them through sanctions wouldn’t work. Witnessing this pattern, Director of National Intelligence James Clapper brought the Senate back to reality with the assessment that “sanctions as imposed so far have not caused [Iran] to change their behavior or policy.” He added that “Iran’s economic difficulties probably will not jeopardize the regime.”

The problem for the US was that there was only so many targets they could sanction. But Iran could keep building centrifuges and keep enriching uranium. So, while the US strategy had an endpoint, the Iranian response did not: the US ran out of things to sanction; Iran kept enriching. Sanctions wasn’t going to work. They were leading to a dilemma: accept Iran’s nuclear program or go to war. That led Obama to the negotiation option. And that is the concern now.

Contrary to Trump’s version of history, sanctions were not bringing about the inevitable collapse of the Islamic Republic and were not producing the desired change.

Lie #7

Today, we have definitive proof that this Iranian promise was a lie. Last week, Israel published intelligence documents – long concealed by Iran – conclusively showing the Iranian regime and its history of pursuing nuclear weapons.

As his only evidence that Iran violated the JCPOA, Trump cited Israeli Prime Minister Benjamin Netanyahu’s recent revelation to the world of proof that “Iran lied, big time, after signing the nuclear deal in 2015.” Netanyahu displayed binders with over 50,000 paper files and a wall of CDs that he said were packed with the proof. But the documents were not “long concealed by Iran,” and they were not conclusive proof that Iran pursued nuclear weapons.

Netanyahu’s “significant new revelations” were not new at all. The binders and discs contained nothing that the IAEA hadn’t seen and dismissed the first time around. Those old attempts to discredit Iran have been carefully discredited by many experts, including Gareth Porter in Manufactured Crisis. The IAEA was finished with them by December of 2015.

Olli Heinonen, the chief inspector of the IAEA at the time of the JCPOA negotiations – and not someone who was in any way soft on Iran – said that the IAEA first saw the “significant new” evidence that Netanyahu revealed in 2005. Watching Netanyahu’s revelation, Heinonen could only say, “I just saw a lot of pictures I had seen before.”

Federica Mogherini, the High Representative of the European Union for Foreign Affairs and Security Policy said that, based on first reports of Netanyahu’s presentation, it “has not put into question Iran’s compliance with the JCPOA.” Mogherini said that the final word had to go to the IAEA. The day after Netanyahu’s presentation, the IAEA said that there was “no credible indications” of Iran working on a nuclear weapons program for several years before the JCPOA.

Lie #8

The agreement was so poorly negotiated that even if Iran fully complies, the regime can still be on the verge of a nuclear breakout in just a short period of time. The deal’s sunset provisions are totally unacceptable.

The most commonly called upon criticism by those hostile to the JCPOA, the “sunset” objection is a chimera. And not just because most non-proliferation agreements have the same fifteen year term this one has. The objection is disingenuous because it is based on a misreading of the agreement, or, perhaps, on not having read it at all. Many of the key restrictions referred to last much more than fifteen years. The text of the agreement specifies that Iran agreed to allow the IAEA to monitor its entire uranium supply chain for twenty-five years and all centrifuge production facilities for twenty. More importantly, though, Trita Parsi points out that “the most important restrictions and inspections instruments are permanent, according to the Additional Protocol to the Nonproliferation Treaty.” Iran commits in the JCPOA to a schedule for ratifying the Additional Protocol.

Lie #9

“Making matters worse, the deal’s inspection provisions lack adequate mechanisms to prevent, detect, and punish cheating and don’t even have the unqualified right to inspect many important locations, including military facilities.”

The JCPOA clearly states that inspectors can get access to military sites if the IAEA has credible evidence that suspicious activity is occurring on the site. The IAEA says that there has been no credible evidence of suspicious activity and that “Washington has not provided such indications to back up its pressure on the IAEA to make such a request.”

IAEA chief Amano Yukiya defended the inspections as the world’s “most robust nuclear verification regime.”

Lie #10

Not only does the deal fail to halt Iran’s nuclear ambitions, but it also fails to address the regime’s development of ballistic missiles that could deliver nuclear warheads.

The deal was never meant to address Iran’s ballistic missiles, and their ballistic missiles are incapable of delivering nuclear warheads.

Resolution 2231, approved in support of the JCPOA, “calls upon” Iran “not to undertake any activity related to ballistic missiles designed to be capable of delivering nuclear weapons” for a defined period of time. Iran insists they are in compliance with this requirement because the missiles are defensive and are designed to carry a conventional payload: the missiles are not capable of being nuclear armed. Iran expert Gareth Porter says that Iran’s “ballistic missiles were not designed for nuclear weapons.” Porter cites experts who saythat “Iran’s medium-range missiles have been designed for conventional deterrence,” and that “Iran would have to redesign at least the internal components of the missile to adapt it to carrying nuclear weapons.”

Besides, since Iran verifiably does not have a nuclear weapons program, that the missile cannot carry a nuclear weapon becomes tautological. Similar earlier American claims about Iranian nuclear missiles have all been embarrassingly discredited.

*  *  *

Bonus Lie #11

“It has now been almost 40 years since this dictatorship seized power and took a proud nation hostage.”

Leaving aside that the revolution almost forty years ago seized power from an American/British imposed dictatorship that the Americans and British brought to power with a coup against the overwhelmingly popularly elected Mohammad Mosaddeq, the Iranian regime did not take “a proud nation hostage.” Iran experts Flynt Leverett and Hillary Mann Leverett say that “at every step along the way – from an initial referendum on the establishment of an Islamic republic, through elections for a constituent assembly to draft its constitution, to the ratification of that constitution – Khomeini would ask for and receive the Iranian public’s overwhelming support.” They go on to show just how great support for the new government was in 1979: “less than two months after the revolution’s triumph, a referendum was held to decide whether a postrevolutionary Iranian state should be, as Khomeini had pledged, an Islamic republic. Well over 90 percent of eligible voters turned out: 98.2% of them voted yes.”

Ooops, that’s eleven!

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Israeli Intelligence Officers Singing Persian Song In Leaked Viral Video Exposes Identities

The bizarre story of a censored Israeli military academy video showing uniformed IDF soldiers singing a Persian language love song became public earlier this month, but takes on more significance in light of this week’s missile exchange between Israel and allies Syria and Iran

One week prior to last Thursday’s military escalation which started in the Golan but ended with Israel launching a massive missile attack on Damascus, the video of a performance by about 50 new graduates of an Israeli military intelligence language course appeared on Israeli social media, a course wherein Israeli Defense Forces personnel learn Farsi (or alternately called Persian).

Notably, it was released the same week Israeli Prime Minister Benjamin Netanyahu accused Iran of lying about its nuclear program in a live broadcast, which precipitated President Trump’s pulling the US out of the Iran nuclear deal. Was the “leaked” video a provocative stunt meant to mock and taunt the Iranians? 

Still frame of the illegally uploaded IDF footage. Israeli censors quickly tried to remove it, but not before it went viral. 

The Persian song, “Sultan of Hearts” was sung by the trainees in a ceremony at an army base, and a parent in the audience subsequently uploaded video to social media. As the folk song is very well-known in Iran, the video quickly went viral through Iranian social media and across the Middle East before being picked up by Israel’s Channel 10 news; however the original poster since removed it after Israeli authorities ordered it be taken down as it was filmed at a sensitive location. 

A spokesperson for the IDF told The Times of Israel, “The video was filmed at a private ceremony. One of the soldiers’ parents who attended the ceremony innocently posted the video, contravening information security regulations. When asked, he immediately removed the video.”

The odd video showing intelligence soldiers singing in Farsi in front of a large audience evoked different reactions on Middle East social media — some interpreted it at the time as an extension of peace, while others saw it as a strange PR stunt meant to taunt Iran in the midst of ongoing Israeli threats. Or it could simply be a display of the new course graduates’ language skills captured in an ill-timed video. 

Regardless, the video’s rapid spread on the internet has produced blow-back for the Israelis.

The lyrics include lines such as: “With beautiful love, the world is very small. I’m with the memory of you everywhere, everywhere, so I don’t abandon you,” and further, “You are the king of my heart, You’ve broken the gates of my heart, You’ve pledged your heart to mine, You joined me, One heart says, ‘go, go,’ My other heart says, ‘don’t go, don’t go,’ What will I do without you?”  according to a partial translation by Iranian scholar Reza Akbari.

As to the timing and context of the video’s release, The Times of Israel explains:

Twitter users in Iran were conflicted over the video, with some seeing it as further evidence of how good Israeli intelligence may be, while others saw hopes for peace in the choice of the love song.

The video was shared only a few days after Prime Minister Benjamin Netanyahu revealed a massive Israeli undercover operation carried out in Tehran, in which the Mossad managed to remove tons of paper and digital files on Iran’s clandestine nuclear weapons program out of the Islamic Republic.

Whether it was an “intentional leak” or just a casual and fluke incident, one aspect which hasn’t been discussed is the fact that the video provides close-up facial footage of Israeli intelligence operatives. Likely this is why the Israeli military command quickly tried to remove the online video, though it was too little too late. 

Middle East analyst and Iran specialist Holly Dagres explained that, “the soldiers are part of Israel’s intelligence unit focusing on Iran.” Halfway through the one minute video dozens of the singing soldiers’ faces are zoomed in on.

Considering that these new graduates are potential elite intel officers related to Israel’s Iranian intelligence collection team, it appears their cover is now blown for all possible future covert operations. Like the US military, there is often a revolving door of experienced personnel shared between the military and more elite Mossad and other intelligence branches (similar to the way many career CIA and NSA officers are former military).

Both the Mossad and IDF frequently conduct high-risk intelligence operations abroad related to Iranian assets and targets, and as we’ve reported this week, no less than the commander of the National Guard himself is now a target of Israeli covert assassination plans.

No doubt, the Iranians are likely studying the identities of those soldiers who appear in the video very carefully.  

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Credit-Driven Train Crash, Part 1

Authored by John Mauldin via MauldinEconomics.com,

In 1999, I began saying the tech bubble would eventually spark a recession. Timing was unclear because stock bubbles can blow way bigger than we can imagine. Then the yield curve inverted, and I said recession was certain. I was early in that call, but it happened.

In late 2006, I began highlighting the subprime crisis, and subsequently the yield curve again inverted, necessitating another recession call. Again, I was early, but you see the pattern.

Now let’s fast-forward to today. Here’s what I said last week that drew so much interest.

Peter [Boockvar] made an extraordinarily cogent comment that I’m going to use from now on: “We no longer have business cycles, we have credit cycles.”

For those who don’t know Peter, he is the CIO of Bleakley Advisory Group and editor of the excellent Boock Report. Let’s cut that small but meaty sound bite into pieces.

What do we mean by “business cycle,” exactly? Well, it looks something like this:


Photo: Wikispaces (Creative Commons license)

A growing economy peaks, contracts to a trough (what we call “recession”), recovers to enter prosperity, and hits a higher peak. Then the process repeats. The economy is always in either expansion or contraction.

Economists disagree on the details of all this. Wikipedia has a good overview of the various perspectives, if you want to geek out. The high-level question is why economies must cycle at all. Why can’t we have steady growth all the time? Answers vary. Whatever it is, periodically something derails growth and something else restarts it.

This pattern broke down in the last decade. We had an especially painful contraction followed by an extraordinarily weak expansion. GDP growth should reach 5% in the recovery and prosperity phases, not the 2% we have seen. Peter blames the Federal Reserve’s artificially low interest rates. Here’s how he put it in an April 18 letter to his subscribers.

To me, it is a very simple message being sent. We must understand that we no longer have economic cycles. We have credit cycles that ebb and flow with monetary policy. After all, when the Fed cuts rates to extremes, its only function is to encourage the rest of us to borrow a lot of money and we seem to have been very good at that. Thus, in reverse, when rates are being raised, when liquidity rolls away, it discourages us from taking on more debt. We don’t save enough.

This goes back farther than 2008. The Greenspan Fed pushed rates abnormally low in the late 1990s even though the then-booming economy needed no stimulus. That was in part to provide liquidity to a Y2K-wary public and partly in response to the 1998 market turmoil, but they were slow to withdraw the extra cash. Bernanke was again generous to borrowers in the 2000s, contributing to the housing crisis and Great Recession. We’re now 20 years into training people (and businesses) that running up debt is fun and easy… and they’ve responded.

But over time, debt stops stimulating growth. Over this series, we will see that it takes more debt accumulation for every point of GDP growth, both in the US and elsewhere. Hence, the flat-to-mild “recovery” years. I’ve cited academic literature via my friend Lacy Hunt that debt eventually becomes a drag on growth.

Debt-fueled growth is fun at first but simply pulls forward future spending, which we then miss. Now we’re entering the much more dangerous reversal phase in which the Fed tries to break the debt addiction. We all know that never ends well.

So, Peter’s point is that a Fed-driven credit cycle now supersedes the traditional business cycle. Since debt drives so much GDP growth, its cost (i.e. interest rates) is the main variable defining where we are in the cycle. The Fed controls that cost—or at least tries to—so we all obsess on Fed policy. And rightly so.

Among other effects, debt boosts asset prices. That’s why stocks and real estate have performed so well. But with rates now rising and the Fed unloading assets, those same prices are highly vulnerable. An asset’s value is what someone will pay for it. If financing costs rise and buyers lack cash, the asset price must fall. And fall it will. The consensus at my New York dinner was recession in the last half of 2019. Peter expects it sooner, in Q1 2019.

If that’s right, financial market fireworks aren’t far away.

Corporate Debt Disaster

In an old-style economic cycle, recessions triggered bear markets. Economic contraction slowed consumer spending, corporate earnings fell, and stock prices dropped. That’s not how it works when the credit cycle is in control. Lower asset prices aren’t the result of a recession. They cause the recession. That’s because access to credit drives consumer spending and business investment. Take it away and they decline. Recession follows.

If some of this sounds like the Hyman Minsky financial instability hypothesis I’ve described before, you’re exactly right. Minsky said exuberant firms take on too much debt, which paralyzes them, and then bad things start happening. I think we’re approaching that point.

The last “Minsky Moment” came from subprime mortgages and associated derivatives. Those are getting problematic again, but I think today’s bigger risk is the sheer amount of corporate debt, especially high-yield bonds that will be very hard to liquidate in a crisis.

Corporate debt is now at a level that has not ended well in past cycles. Here’s a chart from Dave Rosenberg:

Source: Gluskin Sheff

The Debt/GDP ratio could go higher still, but I think not much more. Whenever it falls, lenders (including bond fund and ETF investors) will want to sell. Then comes the hard part: to whom?

You see, it’s not just borrowers who’ve become accustomed to easy credit. Many lenders assume they can exit at a moment’s notice. One reason for the Great Recession was so many borrowers had sold short-term commercial paper to buy long-term assets. Things got worse when they couldn’t roll over the debt and some are now doing exactly the same thing again, except in much riskier high-yield debt. We have two related problems here.

  • Corporate debt and especially high-yield debt issuance has exploded since 2009.
  • Tighter regulations discouraged banks from making markets in corporate and HY debt.

Both are problems but the second is worse. Experts tell me that Dodd-Frank requirements have reduced major bank market-making abilities by around 90%. For now, bond market liquidity is fine because hedge funds and other non-bank lenders have filled the gap. The problem is they are not true market makers. Nothing requires them to hold inventory or buy when you want to sell. That means all the bids can “magically” disappear just when you need them most. These “shadow banks” are not in the business of protecting your assets. They are worried about their own profits and those of their clients.

Gavekal’s Louis Gave wrote a fascinating article on this last week titled, “The Illusion of Liquidity and Its Consequences.” He pulled the numbers on corporate bond ETFs and compared it to the inventory trading desks were holding—a rough measure of liquidity.

(Incidentally, you’ll get that full report on Monday if you subscribe to Over My Shoulder. What you learn could easily pay for your first year.)

Louis found dealer inventory is not remotely enough to accommodate the selling he expects as higher rates bite more.

We now have a corporate bond market that has roughly doubled in size while the willingness and ability of bond dealers to provide liquidity into a stressed market has fallen by more than -80%. At the same time, this market has a brand-new class of investors, who are likely to expect daily liquidity if and when market behavior turns sour. At the very least, it is clear that this is a very different corporate bond market and history-based financial models will most likely be found wanting.

The “new class” of investors he mentions are corporate bond ETF and mutual fund shareholders. These funds have exploded in size (high yield alone is now around $2 trillion) and their design presumes a market with ample liquidity. We barely have such a market right now, and we certainly won’t have one after rates jump another 50–100 basis points.

Worse, I don’t have enough exclamation points to describe the disaster when high-yield funds, often purchased by mom-and-pop investors in a reach for yield, all try to sell at once, and the funds sell anything they can at fire-sale prices to meet redemptions.

In a bear market you sell what you can, not what you want to. We will look at what happens to high-yield funds in bear markets in a later letter. The picture is not pretty.

To make matters worse, many of these lenders are far more leveraged this time. They bought their corporate bonds with borrowed money, confident that low interest rates and defaults would keep risks manageable. In fact, according to S&P Global Market Watch, 77% of corporate bonds that are leveraged are what’s known as “covenant-lite.” We’ll discuss more later in this series, but the short answer is that the borrower doesn’t have to repay by conventional means. Sometimes they can even force the lender to take more debt. In an odd way, some of these “covenant-lite” borrowers can actually “print their own money.”

Somehow, lenders thought it was a good idea to buy those bonds. Maybe that made sense in good times. In bad times? It can precipitate a crisis. As the economy enters recession, many companies will lose their ability to service debt, especially now that the Fed is making it more expensive to roll over—as multiple trillions of dollars will need to do in the next few years. Normally this would be the borrowers’ problem, but covenant-lite lenders took it on themselves.

The macroeconomic effects will spread even more widely. Companies that can’t service their debt have little choice but to shrink. They will do it via layoffs, reducing inventory and investment, or selling assets. All those reduce growth and, if widespread enough, lead to recession.

Let’s look at this data and troubling chart from Bloomberg:

Companies will need to refinance an estimated $4 trillion of bonds over the next five years, about two-thirds of all their outstanding debt, according to Wells Fargo Securities. This has investors concerned because rising rates means it will cost more to pay for unprecedented amounts of borrowing, which could push balance sheets toward a tipping point. And on top of that, many see the economy slowing down at the same time the rollovers are peaking.

“If more of your cash flow is spent into servicing your debt and not trying to grow your company, that could, over time—if enough companies are doing that—lead to economic contraction,” said Zachary Chavis, a portfolio manager at Sage Advisory Services Ltd. in Austin, Texas. “A lot of people are worried that could happen in the next two years.”

The problem is that much of the $2 trillion in bond ETF and mutual funds isn’t owned by long-term investors who hold maturity. When the herd of investors calls up to redeem, there will be no bids for their “bad” bonds. But they’re required to pay redemptions, so they’ll have to sell their “good” bonds. Remaining investors will be stuck with an increasingly poor-quality portfolio, which will drop even faster. Wash, rinse, repeat. Those of us with a little gray hair have seen this before, but I think the coming one is potentially biblical in proportion.

Casey Jones via Wikimedia Commons

Blowing the Whistle

As you can tell, this is a multifaceted problem. I will dig deeper into the specifics in the coming weeks. The numbers seem unbelievable. I truly think we are headed to a staggering credit crisis.

I began this letter describing the coming events as a train wreck. That comparison came up when my colleague Patrick Watson and I were on the phone this week, planning this series of letters. Patrick and his beautiful wife Grace had just come back from Tennessee, and he told me about visiting the Casey Jones birthplacemuseum in Jackson.

For those who don’t know the story or haven’t heard the songs, Casey Jones was a talented young railroad engineer in the late 1800s. On April 30, 1900, Casey Jones was going at top speed when his train tragically overtook a stopped train that wasn’t supposed to be there.

Traveling at 75 miles per hour, Jones ordered his young fireman to jump, pulled the brakes hard, and blew the train whistle, warning his passengers and the other train. Later investigations found he had slowed it to 35 mph before impact. Everyone on both trains survived… except Casey Jones.

His heroic death made Jones a folk hero to this day. Many songs told the story and even the Grateful Dead and AC/DC paid tribute decades later. (Trivia: He actually tuned his train whistle with six different tubes to make a unique whippoorwill sound. So, when people heard his train whistle, they knew it was Casey Jones.)

Right now, the US economy is kind of like that train: speeding ahead with the Fed only slowly removing the fuel it shouldn’t have loaded in the first place and passengers just hoping to reach our destination on time. Unfortunately, we don’t have a reliable Casey Jones at the throttle. We’re at the mercy of central bankers and politicians who aren’t looking ahead. They can’t simply turn the steering wheel. We are stuck on this track and will go where it takes us.

Next week, we’ll talk about the sequence of how the next debt crisis will arise, how it triggers a recession, and then $2 trillion of deficits in the US and rising debt all over the world. Which just increases pressures on interest rates and lending. And reduces growth. It is not a virtuous cycle.

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Israeli Air Force Strikes Gaza Strip, More Than 20 Missiles Fired

Three days after the biggest military escalation between Israel and Syria in years, in which the IDF launched dozens of air force attack missions on alleged Iranian sites operating out of Syria, on Saturday evening the Israeli military struck Gaza with explosions heard in the Strip’s north.

According to Palestinian reports, the Israel Air Force targeted a generator and fired as many as 20 missiles toward an agricultural area east of the city of Beit Hanoun. No casualties have been reported according to local press.

According to Haaretz, the attack comes hours after Defense Minister Avigdor Lieberman announced that Israel is closing the Kerem Shalom crossing between Israel and the Gaza Strip due to arson caused by Palestinian protesters along the border. According to the Israeli army, the crossing will be closed except for humanitarian cases that will be approved on an individual basis. The crossing, the only one through which cargo passes from Israel to Gaza, will stay closed until the damage caused by the arson is repaired.

On Friday, Palestinians protesting along the border reportedly set fire to a pipeline through which Israel supplies gas and fuel to Gaza and a conveyor belt near the crossing. This is the second consecutive week that demonstrators have set fire to the Palestinian side of the crossing.

The attack comes just two days ahead of the US embassy moving to Jerusalem.

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Billionaire Bloomberg Blasts “Epidemic Of Dishonesty” Since Obama Left

In what could set a new standard for cognitive dissonance, former NYC mayor Michael Bloomberg warned in a commencement speech on Saturday at Texas’ Rice University that “an endless barrage of lies” and a trend toward “alternate realities” in national politics pose a dire threat to U.S. democracy.

This is bigger than any one person. It’s bigger than any one party…”

Careful not to call out President Trump specifically – having derided him  as “a con” and a “dangerous demagogue” before his electionAP reports the 76-year-old billionaire told the assembled crowd that Americans are facing an “epidemic of dishonesty” in Washington that’s more dangerous than terrorism or communism…

“How did we go from a president who could not tell a lie to politicians who cannot tell the truth?” 

He blamed “extreme partisanship” for an unprecedented tolerance of dishonesty in U.S. politics. People are committed more to their political tribes than the truth, he said, suggesting that the nation is more divided than any time since the Civil War.

“There is now more tolerance for dishonesty in politics than I have seen in my lifetime,” Bloomberg said.

“The only thing more dangerous than dishonest politicians who have no respect for the law is a chorus of enablers who defend their every lie.”

Bloomberg, who flirted with a potential independent presidential bid in 2016, did take an indirect jab at President Trump with respect to cliemate change…

“If 99 percent of scientists whose research has been peer-reviewed reach the same general conclusion about a theory, then we ought to accept it as the best available information — even if it’s not a 100 percent certainty,” Bloomberg said. “That, graduates, is not a Chinese hoax.”

As The Hill notes, last month, the former mayor pledged to cut a check for $4.5 million to fulfill the U.S.’s commitment to the Paris Climate Accords, which Trump announced the U.S. would exit last year.

And as Bloomberg’s address neared its end, he dipped further into the rabbit hole of doom…

“When elected officials speak as though they are above the truth, they will act as though they are above the law,”

“And when we tolerate dishonesty, we get criminality. Sometimes, it’s in the form of corruption. Sometimes, it’s abuse of power. And sometimes, it’s both.”

Concluding ominously…

“The greatest threat to American democracy isn’t communism, jihadism, or any other external force or foreign power,” he continued.

“It’s our own willingness to tolerate dishonesty in service of party, and in pursuit of power.”

Falling just shy of calling for #resistance directly, the billionaire blamed “extreme partisanship” for an unprecedented tolerance of dishonesty in U.S. politics, pointing out that people are committed more to their political tribes than the truth… suggesting that the nation is more divided than any time since the Civil War.

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“Going Broke Faster” – Economic Numbers Are Less Than Meets The Eye

Authored by James Rickards via The Daily Reckoning,

Investors can be forgiven for thinking they hit the trifecta last Friday.

The U.S. Bureau of Labor Statistics reported that unemployment had dropped to 3.9%, the lowest in almost 20 years.

The Federal Reserve Bank of Atlanta reported that its widely followed GDP forecasting tool was showing projected growth for the second quarter of 2018 at 4%, exactly where Trump boosters like Larry Kudlow said it would be.

Finally, the Dow Jones industrial average rallied 332 points (1.39%), partly in response to the other good news. It was almost enough to make a trader sing, “Happy days are here again.”

Or not.

The fact is that this good news hides more than it reveals. A look behind the numbers discloses a sobering outlook for investors.

Let’s start with the employment report. The U.S. Department of Labor, Bureau of Labor Statistics report dated May 4, 2018, showed the official U.S. unemployment rate for April 2018 at 3.9%, with a separate unemployment rate for adult men of 4.1% and adult women of 3.7%.

The 3.9% unemployment rate is based on a total workforce of 160 million people, of whom 153 million are employed and 6.3 million are unemployed. The 3.9% figure is the lowest unemployment rate since 2001, and before that, the early 1970s.

The average rate of unemployment in the U.S. from 1948 to 2018 is 5.78%. By these superficial measures, unemployment is indeed low and the economy is arguably at full employment.

Still, these statistics don’t tell the whole story.

Of the 153 million with jobs, 5 million are working part time involuntarily; they would prefer full-time jobs but can’t find them or have had their hours cut by current employers. Another 1.4 million workers wanted jobs and had searched for a job in the prior year but are not included in the labor force because they had not searched in the prior four weeks.

If their numbers were counted as unemployed, the unemployment rate would be 5%.

Yet the real unemployment rate is far worse than that. The unemployment rate is calculated using a narrow definition of the workforce. But there are millions of able-bodied men and women between the ages of 25–54 capable of work who are not included in the workforce.

These are not retirees or teenagers but adults in their prime working years. They are, in effect, “missing workers.” The number of these missing workers not included in the official unemployment rolls is measured by the Labor Force Participation Rate, LFPR.

The LFPR measures the total number of workers divided by the total number of potential workers regardless of whether those potential workers are seeking work or not. The LFPR plunged from 67.3% in January 2000 to 62.8% in April 2018, a drop of 4.4 percentage points.

If those potential workers reflected in the difference between the 2018 and 2000 LFPRs were added back to the unemployment calculation, the unemployment rate would be close to 10%.

Of course, there are limits to labor force participation. Some potential workers suffer chronic pain or other disabilities, some are retired, some are students, some are at home raising children. Those are reasons why the LFPR has never been much over 67% since the data have been recorded.

But the drop in LFPR to 62.8% in the ninth year of an economic expansion is stunning. America has a missing workers problem that accounts in large measure for the slow growth, persistent low inflation, stagnant wages, declining velocity of money and social dissatisfaction that have characterized the U.S. economy since the end of the last recession in June 2009.

American labor markets are not tight. America is not even close to full employment. America is in a depression. That’s one reason why wages have been stagnant despite declining unemployment rates.

Another serious problem is illustrated in Chart 1 below. This shows the U.S. budget deficit as a percentage of GDP (the red line measured on the left scale) compared with the official unemployment rate (the green line measured on the right scale).

From the late 1980s through 2009, these two time series exhibited a fairly strong correlation. As unemployment went up, the deficit went up also because of increased costs for food stamps, unemployment benefits, stimulus spending and other so-called “automatic stabilizers” designed to bring the economy out of recession. That makes sense.

But as the chart reveals, the correlation has broken down since 2009 and the two time series are diverging rapidly. Unemployment is going down, but budget deficits are still going up.

That’s unusual because normally when unemployment drops the economy is getting stronger, benefit spending drops and the budget deficit shrinks. In effect, America uses the good times to save for a rainy day (or at least tries not to spend as much as when it’s raining).

This is good evidence that the economy is not nearly as strong as the low unemployment rate indicates. That’s because of the army of 10–15 million “missing workers” described above, many of whom are receiving benefits in the form of disability payments, early Medicare, food stamps or rental assistance. Instead of shrinking rapidly, these payments are stuck at near-recession levels.

It’s also the case that past deficit spending has now caught up with the U.S. The debt-to-GDP ratio is over 105%. Research shows that any debt-to-GDP ratio over 90% results in slower growth instead of faster growth when you pile on more debt. The U.S. is no longer getting any bang for the buck from deficit spending.

We’re just going broke faster.

As for the Atlanta Fed GDP estimate of 4% for second-quarter growth, that’s a statistical quirk based on the methodology used by the Atlanta Fed. It’s not that the number is bogus, it’s just that the measures suggesting stronger growth are reported earlier in the quarter and those suggesting weaker growth are not available under later in the calendar quarter. This means the estimates start high but come down to Earth as the quarter progresses.

The Atlanta Fed GDP estimate is useful but you have to know how to interpret it. In the first quarter, the estimate showed 5.4% growth but declined to 2% by the end of the quarter. (The actual reported growth was 2.3%, not too far from the Atlanta Fed estimate).

The same thing is happening again. I expect Atlanta’s number to decline from 4% today to 2% by mid-June, near the end of the quarter. That’s the same-old, same-old weak growth we’ve had since 2009. Nothing to write home about.

As for that stock market rally, it’s a temporary blip. Investors should be reminded that the stock market peaked on Jan. 26, 2018, and is down about 10% since then notwithstanding occasional one-day rallies. The market has traced out a series of “lower highs” after each rally. That’s a sign of a dying bull market and more declines to come.

So don’t believe the TV happy talk. Rigorous analysis of employment, debt, deficits, growth and stock markets reveals a dismal picture. Investors should lighten up on equities and increase their allocations to cash and gold.

Events will probably get worse from here.

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Tesla’s Top Engineer Takes “Leave Of Absence” At Critical Moment

A little over a month after Elon Musk confirmed on Twitter that he has taken over direct control of the division that’s in charge of the production-challenged Tesla Model 3 (one day after cracking April Fools’ jokes about Tesla filing for bankruptcy) replacing Doug Field, the company’s chief engineer overseeing vehicle development and former Apple executive, who was “pushed aside” after Tesla missed its goal of 500 Model 3 sedans per day…

… late on Friday the WSJ reported that Tesla’s top engineer is taking a leave of absence from the company “at a crucial moment when the electric-car maker is struggling to boost production of the Model 3 sedan.”

Doug Field, Tesla’s senior vice president of engineering, is stepping away from the company for several weeks, these people said. One person described the absence as a “six-week sabbatical,” and Tesla declined to say when he would come back.

Seeking to downplay the split, Tesla told the WSJ that “Doug is just taking some time off to recharge and spend time with his family. He has not left Tesla.”

Translation: Field – the company’s head of engineering – has left Tesla, but the company is hoping to delay confirmation for another month and a half. After all, it was just a year ago that Musk asked Field to manage both engineering and production to better align the two departments, the CEO said in last month’s tweet in which he reported he was splitting engineering and production duties, saying it was “better to divide & conquer.”

In a separate tweet Musk also wrote that he regarded Field as “one of the world’s most talented” engineering executives; as Bloomberg notes, Field is one of only four executive officers named in the company’s recent proxy statement.

Should Field indeed be departing, it would be a crucial blow to the company which has been scrambling to reach its target of 5,000 Model 3 units per week; Field has been a “key leader at the Silicon Valley auto maker since joining in 2013 from Apple” according to the WSJ and oversees all engineering of Tesla’s vehicles. As noted above, that changed this spring when Chief Executive Elon Musk said he retook control of production.

Ironically, the hiring of Field from Apple, where he was vice president of Mac hardware engineering, was touted as a win for Mr. Musk, who had big ambitions for Tesla. Field had also worked at Ford Motor and Segway, giving him unique experience in both the tech and autos industry.

When Field first joined Tesla, he said driving a Tesla for the first time “was like using the first Mac with a mouse. He knew that eventually everyone would want to drive one.” It appears that the Mac may have encountered its first BSOD.

Meanwhile, as is well known, the electric auto maker is at a critical juncture as it tries to produce enough Model 3 cars to generate cash to fund the business and instill confidence in investors that the company can create its first mass-market vehicle, even as the competition is breathing down Tesla’s neck.

 

The other problem, of course, is homegrown: in 2016, Musk suggested Tesla would make as many as 200,000 Model 3s sedans, which are supposed to start at $35,000, in the second half of last year, a milestone the company came nowhere near meeting. Tesla instead made about 2,700 during that period. The company hasn’t yet begun making the lower-priced version.

Realizing how far behind schedule the company is, Musk effectively threw Field under the bus, claiming Tesla relied too much on automation to make the Model 3. “A step change in manufacturing doesn’t come without its challenges, particularly early in the process, and we made a mistake by adding too much automation too quickly,” Musk told shareholders in Tesla’s quarterly update earlier this month, just before Musk cut off questions from two sellside analysts in what has now become an infamous meltdown on par with Jeff Skilling “asshole” moment, just as Enron was about to implode.

All this comes as Tesla is facing a dire cash crunch: the company finished March with $2.7 billion in cash on hand, an amount that barely covers the portion of its long-term debt and capital leases due this year. While Musk has claimed the company won’t need to raise more money this year, many analysts say they expect Tesla will raise additional capital, a confirmation Tesla made in its 10-Q filing.

Finally, if Doug Field is indeed leaving, he certainly won’t be the first senior level exec to part ways with Elon Musk as the following list of recent and not so recent departure clearly shows.

 

 

 

 

 

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Italian Coalition Takes Shape: Platform Includes Parallel Currency

Authored by Mike Shedlock via MishTalk,

Five Star and Lega want another three days to conclude talks. Neither Di Maio nor Salvini would be Prime Minister.

A reader informed me yesterday that Five Star was pro-Europe and not Eurosceptic.

Compared to what?

Certainly Five Star leader Luigi Di Maio is a far cry from former Five Star leader, Beppe Grillo. But some of that change in positioning was little more than political expediency to win votes.

The platform now in the works includes a parallel currency, reduced immigration, and flat taxes.

Eurointelligence Comments

This is what real coalition negotiations look like. The leaders meet and set the agenda for sub-committees to talk about specific policy issues. That process will start in Italy tomorrow, when the deputy leaders of the two parties come together, but some of the outlines have already been drawn up by the leaders themselves.

What do we know so far? Five Star and Lega are very different political parties, but they have enough in common for a radical legislative agenda. The two sides seem to be inching towards a neutral prime minister, in other words neither Di Maio nor Salvini. The name mentioned by Italian newspapers this morning is that of Giampiero Massolo, a career diplomat who seems to be acceptable to both parties. Massolo will clearly only be the frontman. Power will rest with Di Maio and Salvini.

It will be interesting to see how the two sides will legislate together on issues that might affect Silvio Berlusconi personally. We don’t think he accepted to step aside and let Salvini run the show himself without any clandestine conditions. Any undertaking Salvini might have given him would be difficult for Five Star politically, though.

Corriere della Sera lists the following as the main legislative priorities. If implemented it would be the biggest shake-up of the Italian economic system in modern times.

Platform Provisions

  • The end of the pension reforms under Mario Monti; Five Star is softer on this point than Lega, but together the two parties can be expected to agree fundamental changes.

  • A flat tax on companies and people – in other words a massive tax reduction.

  • A study on the so-called minibot. This is a parallel currency based on future tax receipts, similar to the plans proposed by Yanis Varoufakis in Greece. The minibot was in the Lega’s election manifesto. Five Star is far less radical on the eurozone, having dropped the idea of a referendum, but also seeks changes that are incompatible with the the EU fiscal rules. A parallel currency stands a much greater chance of success in Italy, and it would go some way to solving the government’s fiscal dilemmas. The open question is whether it would constitute a slippery slope towards euro exit.

  • And a citizens’ income, which is Five Star’s big idea, to be implemented next year.

EU’s Worst Nightmare

The Express describes the EU’s Worst Nightmare as Eurosceptics Join Forces.

One of the first things the two parties are likely to agree on will be to scrap a 2011 pension reform which raised the retirement age and required further hikes over time. Economists say repealing the law would cost 20 billion euros ($24 billion) a year, but opponents say it is unfair on ordinary Italians.

Both parties also want to renegotiate the EU’s fiscal rules to allow Italy to spend more. 5-Star has rowed back on a pledge to hold a referendum on Italy’s membership of the eurozone, but the League still calls the euro a “flawed currency” and wants to exit it as soon as is politically feasible.

Setting up a possible institutional clash in Italy, President Mattarella made clear on Thursday that he did not want to see any confrontation with Brussels.

“To think that one can go-it-alone in Europe is knowingly deceptive in front of public opinion,” Mattarella said in a pointedly pro-European speech at a conference on the state of the European Union in the central town of Fiesole.

Major Changes

President Mattarella can make all the pro-Europe noises he wants, but other than force new elections which would likely give Five Star and Lega a bigger majority, there is little he can do.

Major changes are coming but there is no way to pay for them.

Flat taxes and a tax reduction are good ideas. A guaranteed income is a bad idea, but it’s on the way.

Both parties are staunchly anti-immigration.

A parallel currency is indeed a stepping stone to a break from the Eurozone.

Flashback March 1

I do not believe anyone else suggested this outcome: Italy Election March 4: Consider a Surprise M5S + NL Alliance.

In March, many thought I was crazy.

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